Thailand's economy grew almost 6 per cent year on year in the first quarter of 2006, driven by strong exports, prompting caretaker Finance Minister Thanong Bidaya to proclaim yesterday that an annual growth rate of between 4.5 per cent and 5.5 per cent is assured.

"The gross domestic product expanded well above 5 per cent in the first quarter, as exports continued to grow," Thanong said after a meeting with officials at the Bank of Thailand.

The National Economic and Social Development Board will announce the official first quarter growth rate in June. However, the Finance Ministry will consider next month whether its 2006 economic targets should be revised.

Thanong's announcement comes at a crucial time when high oil prices are expected to rein in domestic demand and the baht's appreciation is expected to eat into exporters' incomes. These concerns have already led several brokerage houses to reduce their forecasts for Thailand's economic growth this year.

Caretaker Commerce Minister Somkid Jatusripitak also showed his confidence yesterday by announcing that exports in March probably exceeded US$10 billion (Bt379.2 billion) and that the trade deficit in March shouldn't be substantial, despite the baht's spike.

"Although the Thai currency has strengthened, largely over the past week, the central bank is closely monitoring the situation. Exporters should be able to adjust themselves to the changing environment. We don't want exporters to focus solely on the foreign exchange rate. They should rather focus on product quality improvement," Somkid said.

He said the recent baht appreciation should not cause an unusual rise in imports. The Commerce Ministry has been closely monitoring imports while trying to boost exports in order to minimise the trade deficit.

Crude oil futures in Singapore yesterday hit US$70 (Bt2,653) a barrel for the first time in nearly eight months, lifted by concerns over declining petrol stocks in the US, supply disruptions in Nigeria and tension over Iran's nuclear program. The last time crude futures went beyond $70 a barrel was on August 30, 2005 when they traded at a record $70.85 a barrel after Hurricane Katrina struck the US Gulf coast. Oil companies will consider today whether to once more raise retail fuel prices to record highs.

The baht yesterday ended at Bt37.93 per dollar, continuing its appreciation from Wednesday, when it closed at Bt38.13.

Thanong yesterday sought a meeting with Bank of Thailand governor MR Pridiyathorn Devakula on the climbing currency. After the meeting, Pridiyathorn said Thanong said the baht's appreciation against the US dollar was due to capital inflows into Thailand's equity market.

"The money coming in is mainly investment. There is no hot money," he said.

After the dollar's fall to a fresh six-year low against the baht, Thanong said the dollar might stay below the government's forecast of Bt39 this year.

Despite the baht's spike, Thanong said the Bank of Thailand's monetary policy had been "appropriate" for the economy and that he expected the 14-day repurchase rate to peak soon.

Somchai Sajjapongse, spokesman for the Finance Ministry, said exports were expanding well so far this year. By volume, the growth rate has been more than 10 per cent in the first quarter - above the 6 per cent target. Meanwhile, export value has been growing at a rate of more than 20 per cent.

Somchai said the ministry would keep its gross domestic product growth forecast for the year unchanged at between 4.5 per cent and 5.5 per cent, because exports remained strong.

"We will maintain the same forecast. Should there be any revision, it will be announced in May," he said, pointing out that the average Dubai crude price so far this year had stayed largely within the estimated range, between $58 and $60 a barrel.

 "There is no need for any economic stimulus measures as the economy has been expanding at a satisfactory level in terms of consumption and investment," he said.

Somchai also denied reports that the ministry was seeking to cut the Bt1.48-trillion budget for the 2007 fiscal year, although it has not yet been approved by the government. The budget year starts on October 1.

 He said there would be no change in the figures despite fears that economic growth would be below targets, which could cut the government's expected revenue for the next fiscal year.

"So far, our overall tax collections still exceed the target and our planned budget has received approval from the Cabinet, so there is no need to revise it," Somchai said.

He said the ministry would adhere to fiscal discipline in budget expenditure and downplayed concerns that the country's ongoing political transformation might disrupt spending.

The fears came amid earlier reports that the government is short of cash, due to slower-than-expected revenue collections which threaten a balanced budget in the current fiscal year, during which the government is set to spend Bt1.36 trillion.

Somchai said that in the first two quarters of the 2006 fiscal year, the government collected Bt654 billion in revenue, including Bt409 billion by the Revenue Department, Bt132.7 billion by the Excise Department, Bt50 billion by the Customs Department and Bt62.29 billion by state enterprises.

He also said delayed disbursements to government contractors at the beginning of this year were due to a technical problem.

Business Reporters

The Nation